Britain's car industry

Start your engines

The case for backing the motor industry

AT FIRST sight, Britain's motor industry looks rickety. Last year the government supported car sales with a scrappage scheme, giving motorists £2,000 for swapping cars that were ten years old or more for new ones. That kept the domestic market ticking over until May 2010. Plunging domestic car sales this August, nearly 30% below those in August 2007 (before the distortions of the financial crash, and so a useful comparison), suggest the sector, still a mainstay of British manufacturing, is struggling.

In fact the global vehicle market is more important for British manufacturers than the stuttering domestic one: Britain exports over 70% of the cars and engines that it makes. Buoyed by rising demand in emerging economies, the global market is growing strongly. Moreover, the international motor industry is changing in ways that potentially favour Britain. Lighter, fuel-efficient and low-carbon vehicles are in vogue. Many of Britain's designers and engineers, whether working for foreign manufacturers or racing teams, are at the forefront of this technology.

All the industry needs—at least according to the motor lobby—is some astute government incentives, such as tax credits or grants for research and development (R&D). On September 7th, in advance of next month's spending review, the Society of Motor Manufacturers and Traders (SMMT) made its case to an all-party group of parliamentarians. “The new administration understands the importance of the sector,” says Paul Everitt of the SMMT, hopefully.

The previous Labour government eventually decided to help the motor industry, via its scrappage scheme and by promising loan guarantees and grants to Ford, Nissan and others, in a bid to persuade them to locate production and R&D for new green cars in Britain. The new coalition government has seemed minded to help too, signing off a £360m loan guarantee for Ford and a £20m grant for Nissan in June—though whether it can afford to continue that largesse as it sets about cutting Britain's huge fiscal deficit is questionable.